New ONS inflation data shows that prices for food fell by 0.8% in January 2021, versus the same month in 2020, when measured using the CPIH method.
Food price change has therefore been slightly negative for the last three months.
CPIH inflation for “all items” was +0.9% in January – this is below the government’s target rate of +2.0%, but the latest forecasts from the Bank of England suggest that inflation will pick up strongly in 2021.
“All items” inflation is being moderated by the strongly negative effect of domestic utilities and motoring, but these benefits are likely to begin dropping out of annual comparisons from around March.
ONS cautions that measuring inflation during the Coronavirus emergency is extremely difficult. Around 8% of the total “basket” of goods and services usually sampled were unavailable in January.
Shopper behaviour is also currently quite different to “normal”, and so exposure to price change may be much greater – or, indeed, less – than usual.
ONS is experimenting with new methodologies which will help to account for the impact of Coronavirus on household spending.
The “basket” of goods has also been modified in 2021. This change gives more statistical “weight” to items where consumer spending has increased due to Coronavirus (eg: food and drink, alcohol and tobacco) less to areas where spending has fallen (eg: eating out, recreation and culture, transport).
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